US jobs data is set for release today at 5:30PM GMT+4 and markets are anticipating how the reading will compare to what is expected and to the previous reading. Expectations indicate that the US economy added around 224,000 jobs in Feb 2023, compared to 517,000 jobs in the month prior.
Figure 1: Monthly US Jobs Data. Data source: Bureau of Labor Statistics
Notes from the attached figure:
- The previous reading for the month of January is considered the most active since July 2022, and it ended a decline that lasted for five consecutive months.
- The attached chart does not show us the occurrence of damage to the labor market despite the successive increases in interest rates.
- The most important note is that if expectations are correct at 224,000 jobs, this means breaking important support for the employment data that extended more than two years ago.
The jobs report is crucial in determining expectations for the pace of interest rate hikes and expectations for final interest rates during the upcoming FOMC meetings, so expectations tend to be as follows:
Better than expected and better than previous reading:
The Fed will be more stringent with raising interest rates, thus positive for the dollar and negative for gold and stocks.
Within or below expected:
The Fed will deal with loose interest rates, thus negative for the dollar and positive for gold and stocks.
Between the previous reading and the expected reading:
Since there is a big difference between the previous reading and the expected reading, the closer the real reading is to the previous, the more likely it will be positive for the dollar, and the closer the real reading is to the expected, the more negative it is likely to be for the dollar.
Investors must also to take into consideration these important points:
- The Fed Chairman stressed that interest rate cuts will not happen any time soon
- It was noted that the final interest rate, which is necessary to reach the inflation target of 2%, may be higher than previous expectations.
- It was also pointed out that there are no clear signs indicating a decline in inflation rates.
Therefore, when reading job data expectations today, we have to balance between the opportunity to continue reducing the pace of raising interest rates and between the return of tightening and raising interest rates at a higher pace. In general, we expect that the issuance of these data points will be accompanied by fluctuations in the financial markets, given that the Fed is highly dependent on these reports when considering its future interest rate decisions.
Keep in mind that the initial market reaction, regardless of the nature of the real reading, may be sharp and volatile initially before the market returns to stability. It should be noted that traders have different ideas and convictions in the way they interpret the information issued, and therefore prices cannot move 100% according to that information.
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